‘Too late to save them’: South Africa’s SOEs broken beyond repair

As floundering state-owned enterprises (SOEs) continue to affect South Africa’s unstable economy, experts believe it may be too late to save them.

While the public enterprises portfolio committee welcomed a proposal to declare load shedding a state of disaster, MPs called underperforming SOEs, such as Transnet and diamond company Alexkor, a disaster.

A briefing was held by the public enterprises department (DPE) on the progress made in addressing the Auditor-General’s findings with respect to the department and its associated SOEs.

SOEs in dire straits

The committee was concerned about underperforming SOEs and excessive amounts of fruitless and wasteful expenditure.

Parliament finally understands extent of rot

SOEs in the DPE portfolio include Transnet, SA Forestry Company Limited (Safcol), Alexkor, Eskom, Denel and SA Airways (SAA).

It seemed parliament at long last understood the state of SOEs, chief economist at Efficient Group, Dawie Roodt, said.

Because politicians had not acted earlier, SOEs were, in many instances, not viable anymore.

“Unless you spend very big amounts of money on them, they will simply die,” he said.

Transnet received an unqualified audit opinion in the 2021/22 financial year for the first time in five years, while Safcol received its third.

State diamond dealer Alexkor was likely to complete its audit later this financial year, when the outcome could be a qualified audit.

Meanwhile, Denel had yet to commence a meeting with external auditors.

SAA was expected to finalise its outstanding audits by 31 March.

No more money for bailouts

“It is coming to an end,” Roodt said.

“The tax base to bail out these institutions is not available anymore and it is just too late to save them.”

The adverse findings were due to financial challenges and poor internal controls, the DPE reported.

It was further alarmed because some SOEs, which had previously done well were on the decline, DPE portfolio committee chair Khaya Magaxa said.

SOEs’ financials

“Safcol, for example, reported irregular expenditure amounting to R800 million, despite previously painting a rosy picture when it appeared before the committee in parliament,” he said.

“Transnet recorded R1.1 billion in irregular expenditure and Alexkor is a disaster.

Denel has not issued financial statements for two years and depends on government bailouts to continue operating.

“National Treasury cannot afford these bailouts,” he said.